EIOPA issues no-deal Brexit contract continuity recommendations
European Insurance and Occupational Pensions Authority (EIOPA) has issued guidance for European regulators to ensure insurance contract continuity if the UK leaves the European Union with no deal.
The UK is set to leave the EU on March 30, 2019, with or without a deal, which could have an impact on insurers' - and by extension captive insurers' - right to provide insurance services in EU member states from a single country license.
An EU resident captive insurer may also need a license to conduct insurance business in the UK.
Under a no-deal Brexit, EIOPA suggested UK insurance undertaking and distributors would lose their right to conduct business across the 27 EU member states by way of freedom of establishment and freedom to provide services.
Insurance contracts concluded before March 30 would be valid after that date in principle. Going forward, however, insurance undertaking would not by authorised to carry out insurance activities with regard to cross-border insurance contracts anymore.
"Besides the fact that UK insurance undertakings have taken appropriate measures for most the cross-border insurance into the EU27, there is a residual amount of business that would become unauthorised when the United Kingdom leaves the European Union," said Gabriel Bernardino, chairman of EIOPA. "To ensure the protection of policyholders and beneficiaries concerned national supervisors have to ensure consistent supervisory actions and to cooperate closely and effectively.”
EIOPA has provided nine recommendations with regard to insurance contract continuity, ranging from the authorisation of third country-branches, the lapse of authorisation, the cooperation between the national competent authorities, and the communication to policyholders and beneficiaries to distribution activities.
Recommendations are addressed to National Competent Authorities (NCAs), to help foster supervisory convergence and to ensure consistent supervisory practices.
Some of the recommendations include NCAs allowing the finalisation of portfolio transfer from UK insurance undertaking to the insurance undertaking of the member states.
The full recommendations for the insurance sector in light of a no-deal Brexit can be accessed on EIOPA's website.
Will Thomas-Ferrand, international practice leader at Marsh Captive Solutions, previously said that Brexit is not influencing redomiciliation among European captives, and while there are vast uncertainties around Brexit, it is not high on the risk management agenda for them.